Frequently Asked Questions -- Swiss Banking

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Please give a brief overview of Swiss Banks.

Swiss banks have earned a reputation around the world for providing sophisticated and discreet banking services. There are more than 400 banks in Switzerland, ranging from the "Two Big Banks" down to small banks serving the needs of a single small community or a few special clients. The Two Big Banks, namely Credit Suisse and UBS, have extensive branch networks both throughout Switzerland and in many international financial centers. Banks are licensed by the Swiss Federal Government through the Swiss Financial Market Supervisory Authority (FINMA), and may operate throughout the country. A number also have offices or other representation in foreign countries. Among the licensed Swiss banks are the Swiss branches of banks which have their headquarters in other countries.

How safe are the Swiss banks?

Swiss banks, and Switzerland itself, have a reputation for conservative, prudent financial management. There is a minimal government insurance for small, personal bank deposits. Because of the importance of the banking industry to the overall Swiss economy, any sort of financial crisis in the banking sector would receive the full attention of both the entire Swiss banking industry and of the Swiss government. But in such a situation, there is no way to predict, or even really speculate, on what actions would be taken.

What services do Swiss Banks provide?

Some banks specialize in only a few banking services, whereas others provide a wide range. As in most of continental Europe, individuals usually buy and sell stocks and bonds through their banks. The Swiss banks collectively have a long reputation for managing investment portfolios for their clients, and providing other services such as estate planning, wealth management, trust companies, etc., for individual customers.

What are the "Private Banks?"

Strictly, private banks are those which are not incorporated, and hence the entirety of their partners' assets are available to meet the liabilities of the bank. These banks have a very long tradition in Switzerland, dating back to at least the revocation of the Edict of Nantes (1685).

Few such unincorporated banks still exist; most have become incorporated, i.e., limited liability, companies. The term survives, and "private banking" is used to encompass all the banking services provided to clients in the area of portfolio and other wealth management services. These services are directed primarily at "high net-worth individuals"; consequently, most banks have minimum deposit requirements for such accounts, frequently on the order of $ 1 million (or equivalent).

What is special about Swiss bank secrecy?

Banks in most countries are prohibited from divulging information about their clients, and the provisions of the Swiss law follow the same lines. Swiss law is especially strict on any breach of confidentiality, whether in banking or in other commerce. The banking act adds a special section (introduced in 1934, in order to protect accounts of Germans, especially German Jews, from Nazi confiscation) which makes it a criminal offense, with the possibility of an individual going to jail, for the bank or its employee or agent to improperly divulge any confidential information. These portions of the banking law have been interpreted, both in practice and by the courts, to make it a serious offense to divulge any information about a bank customer to any third party, including official requests of foreign governments, unless very specific criteria have been met. Swiss bank secrecy is reinforced by a constant awareness of the seriousness of the bank's obligation to maintain confidentiality, starting with bank employees having to sign the secrecy portion of the banking act as a condition of employment. Note, however, that branches of Swiss banks located outside of Switzerland must operate according to the laws of countries in which they are located.

The perception that Swiss bank secrecy provides a means of hiding criminal activity is, and has been for many years now, largely myth. Banking secrecy is not a protection from criminal investigations, and Swiss legal authorities routinely cooperate with their foreign counterparts in such matters. The general rule is that an activity which both the foreign government and Switzerland consider a crime will result in cooperation, including Swiss authorities examining bank account transactions.

The perception that Swiss bank secrecy can be used to hide criminal activity is due to many factors. Partly it is an historical relic; prior to the 1980s, there were a number of financial activities which Switzerland did not consider criminal, but which many other countries did. Today, Switzerland's financial legislation is quite similar to that of most other OECD countries, and financial crimes in one jurisdiction are likely to be considered criminal in Switzerland. Partly it is due to the difficulty having enough information to make a request; "fishing expeditions" cannot be done. This is quite similar to both internal and international practice in most countries, but can be used as a convenient excuse by frustrated criminal investigators. And partly it is due to specific differences in criminal law because the legal definition of a crime can vary from country to country.

Switzerland is a significant participant in the global financial community. As such, it has recently concluded tax treaties with other countries, notably the USA, which provide automatic exchange of financial and tax information of Swiss account holders. This trend of cooperating on tax matters is likely to continue, and the days of being able to use quirks of Swiss law to avoid taxes are rapidly coming to an end.

Inheritance, divorce, and civil tax matters present special problems vis-a-vis banking secrecy because these are civil rather than criminal matters. But as the world becomes more connected, it is likely that Swiss bank secrecy will provide about the same protection as bank confidentiality legislation in other OECD countries.

What are numbered accounts?

Numbered accounts (or pseudonym accounts) are not very different from normal bank accounts. The usual account records omit reference to the customer's name or other identifying information, replacing it with a code number or the pseudonym. The relationship between the code number or pseudonym and the actual customer is known only to a few senior bank employees. It is important to emphasize that a Swiss bank has an obligation to know the true identity of both the account holder and its beneficial owner, and that there is no such thing as an anonymous account. Because of the constant awareness and strict enforcement of bank secrecy, there is actually little need for numbered accounts, and it should be noted that they incur additional overheads for the bank (it is more difficult to validate transactions to and from such accounts). For all these reasons, most stories one reads about anonymous, numbered accounts are fiction.

How can I open a Swiss bank account?

Contact the bank with which you want to do business and get their conditions for opening an account. Small accounts are expensive to maintain, and for non-residents most banks have large minimum deposit requirement.

Swiss laws designed to prevent money-laundering are very strict. The Swiss bank is required to know its client sufficiently well to ensure that the funds being placed on deposit are unlikely to be coming from illegal activities. Opening an account on behalf of someone else is very tightly regulated, and those allowed to open such accounts must meet the same requirements as banks with respect to knowing the client. While each bank may set its own internal policies to ensure compliance with the money-laundering legislation, most banks require a personal interview before opening an account. The standard policy is therefore to interview the client at the bank's offices in Switzerland, make copies of identity documents (passport) and any other relevant informaiton, and discuss how the account will be used and the source of funds. Ony after evaluating this information will the bank decide whether to accept an individual as a client. We advise extreme caution before becoming involved with any person or company that indicates otherwise.

Non-residents of Switzerland are, of course, subject to any legislation of the jurisdiction in which they reside. Furthermore, some countries impose their laws on their citizens no matter where they reside. So while there is no Swiss legal restriction which prevents anyone from opening an account with a Swiss bank, residents or citizens of other countries may be prohibited from having such an account. A Swiss bank is not under an obligation to accept a client, and a number of factors will be considered in deciding whether to accept a new client, including such questions of residence and citizenship. In addition to questions of residence and citizenship, bank will consider whether what the potiential client wants to do is legal. Money laundering is a particular concern, and because some countries have a reputation for suspect activities a Swiss bank may have a blanket policy of not accepting new clients from that country. Another problem can be that a country has legislation which is in conflict with Swiss law and which can put the bank in an impossible position of conflict; clients from such a country may not be accepted for this reason (many Swiss banks put the USA into this category). All of this means that non-residents will find opening a Swiss bank account more or less difficult, even when as an individual they would be a desireable client.

There is no federal law in Switzerland governing the disposition of dormant accounts. In general, when a client has not been heard from for a number of years, the bank declares the account dormant. What happens then depends on a number of factors, including the laws of the canton in which the account was opened and any specific instructions the client may have given the bank for such an eventuality. Most business records in Switzerland, which includes all transactions in bank accounts, must be retained for 10 years; if an account is closed, there is therefore likely to be no record of it at all once 10 years has gone by. Small accounts may vanish because annual charges exceed any interest income, resulting in a zero balance and automatic closure; if there is then a wait of 10 years before looking, there won't be any trace of the account. In researching a suspected lost account, the most important information is the name of the bank which held the account; if that is known, the bank should be contacted directly with as many details of the case as are known, and they will advise on the correct procedure. However, bank secrecy prevents them from answering the question "did X have an account with you"; such questions are routinely refused.

If the bank is not known, the search is obviously much more difficult. The Swiss Bankers Association has an office which can attempt to trace dormant accounts when the bank is not known (Swiss Banking Ombudsman; Bahnhofplatz 9; Postfach 1818; 8021 Zürich; Switzerland; Tel. (+41) 43 266 14 14 (or +41 311 29 83 for French or Italian); Fax. (+41) 43 266 14 15; e-mail is not available). Contact this office with specifics, and they can advise. In some cases they will conduct a search for a missing account, charging a fee for this service. No guarantee of success can be given for such searches, as there are reasons that even if an account once existed there is probably no remaining record of it if it was closed for any reason more than 10 years ago. Generally this office will only conduct a search once the 10-year period has passed (hence in 2013 they will consider requests for accounts which have been inactive since 2003).

If the account has been dormant since 1945, bank secrecy has been eased somewhat and the procedures are different. The claims of holocost victims and survivors have largely been settled under various legal proceedings; additional information can be found at http://www.dormantaccounts.ch.